Pilots’ union chairman
calls Hawaiian pension
default ‘insulting’

The airline asks federal
Bankruptcy Court for a fifth
extension with Boeing Capital

The head of Hawaiian Airlines' pilots union lashed out at the company yesterday for defaulting on a payment to the Air Line Pilots Association pension plan just days before the airline disclosed it was profitable for the fourth consecutive month.

Capt. Jim Giddings, chairman of the Hawaiian pilots' master executive council, said "it's ridiculous and insulting" that Hawaiian missed a $4.25 million payment due Sept. 15 to the pension plan when the airline had net income of $20.3 million in August. Hawaiian Airlines, as required by U.S. Bankruptcy Court, disclosed its monthly operating expenses in a filing on Friday.

"Usually when a bankrupt company makes a profit, they tell the world," Giddings said. "Hawaiian is trying to keep their profitability a secret in order to justify mortgaging our members' retirement by attacking our pension plan. This back-door announcement proves the point ALPA made in court: There's no financial reason why (Hawaiian Airlines) could not have kept its promise and made the Sept. 15 pension contribution."

ALPA noted in a press release that the filing was "unpublicized." However, Hawaiian trustee Joshua Gotbaum said yesterday that the airline's financial statements are filed monthly with Bankruptcy Court and are reported to the company's employees at the same time.

Hawaiian had $43.7 million in net income through the first eight months of the year and $83.2 million in unrestricted cash. But the airline said in a Sept. 12 court hearing involving the pilots' pension plan that it expects its cash position to dwindle now that the peak travel season has ended. Trustee attorney Bruce Bennett said the airline's cash position already had been reduced by about $18 million to $66 million by Sept. 11 -- the day before the hearing.

That reduction raised some eyebrows with the pilots, who wanted to know the reason for the significant cash burn.

Mark Dunkerley, president and chief operating officer of Hawaiian, said in a letter to Giddings that the airline had spent $6 million on payroll during that time -- a typical occurrence -- as well as $11 million to purchase of a tanker's worth of aviation fuel. Dunkerley said the latest purchase would provide fuel to Hawaiian for roughly six weeks.

"There are other receipts and payments made throughout each month which, when all is said and done, are expected to reduce our cash balances throughout the winter but not at the rate of $18 million every 11 days," Dunkerley said.

Some of the pilots claim that the airline's failure in court to mention the reason for the sudden decline in cash made Hawaiian's situation look worse than it actually appears.

Gotbaum, though, defended his decision to seek the suspension of payments to the pilots' pension plan.

"Hawaiian has always been very profitable during the summer," Gotbaum said. "Unfortunately, the situation changes in the fall and winter, as fewer tourists come to Hawaii. We asked permission to defer our pension contribution to make sure Hawaiian has the resources it needs to continue throughout the year and emerge from bankruptcy successfully. We hope that Hawaiian continues to be profitable but, until we are sure, it makes sense to conserve cash."

Without the suspension of payments, Hawaiian said it will have to pay the pilots' pension plan a total $45 million over 25 months. At the recent court hearing, Bankruptcy Court Judge Robert Faris told the two sides to negotiate on the pension issue and then return for a hearing on Oct. 24.

"We are all well aware that pensions are a critical part of our pilots' security and that any action concerning them is deeply disturbing to pilots and their families," Gotbaum said. "Nonetheless, we must preserve Hawaiian's resources, to make sure that we can preserve the airline for pilots and everyone else."

In another matter, Hawaiian Airlines filed a motion in Bankruptcy Court yesterday asking for a fifth extension to continue negotiating restructured lease agreements with its primary aircraft lessor, Boeing Capital Corp.

The airline, which entered Chapter 11 reorganization bankruptcy on March 21, asked for an extension until Oct. 31 to prevent any repossession of the aircraft it leases from Boeing Capital. The current extension was due to expire Sept. 30.

Boeing Capital leases to Hawaiian 16 of the 27 planes in the airline's fleet, including 13 Boeing 717s -- which constitute all of Hawaiian's interisland aircraft -- as well as three 767s that are used for mainland flights.

Hawaiian previously reached restructured agreements with Ansett Worldwide on seven 767s and International Lease Finance Corp. on four 767s.


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